Have you ever heard of cube-based pricing? If you haven’t already, I’m pretty sure you will in the next few months. A number of less-than-truckload (LTL) carriers of general commodity—as well as many shippers—have shown a keen interest in exploring cube-based pricing. As a matter of fact, a handful of carriers have already started developing their own cube-based pricing systems, and the pioneers of cube-based believe that shippers will be able to save between 8 and 10 percent of their shipping costs under the new system.

It should be stated upfront that this pricing system is not designed for all commodities being shipped in LTL service, such as ladders or hazardous materials to name two. In the early stages of development, the pricing concept is being designed to attract palletized shipments, particularly those weighing less than 500 pounds.

Why that weight? Many LTL carriers say that about 85 percent of their shipments are now palletized, and of that number about 65 percent weigh less than 500 pounds. Shippers should also be aware that cube-based pricing is not being developed collectively by a group of carriers. Each carrier is crafting its own version of the pricing system.

At this stage, cube-based differs significantly from the standard pricing system that uses one or more of 18 classes assigned to commodities in the National Motor Freight Classification (NMFC) class rates. Those rates vary according to distance of the haul and to the total weight of the shipment—six weight breaks in all. Under cube-based pricing, however, all commodities are assigned one of only five cube groups.

For example, if the commodity rated in the NMFC takes a class 50, 55, or 60 rating, it would be assigned a cube D1 rating. This commodity would have a cube of one to 17 cubic feet. A cube D5 rating, on the other hand, would be based on a NMFC rating of class 125 or higher, and have a cubic footage ranging from 6.9 to one pound. Another factor that could be used to assign one of the five classes would be the height, in inches, of a 40 inch by 48 inch loaded pallet. If the height of the pallet load was 15 inches or less, it would be assigned a cube D1 rating.

Following are factors that change the rates.

• Whether the pallet is stackable or non-stackable.
• The day of the week the shipment is made, with Wednesday shipments generally taking the lowest rates.
• The weight of the shipment, with five weight breaks assigned. On shipments weighing less than 500 pounds, rather than the usual one rate break assigned, there would be rates for four weight breaks—up to 100 pounds, 101 to 199 pounds, 200 to 299 pounds, 300 to 399 pounds, and 400 to 499 pounds. A final weight break would apply for shipments weighing 500 pounds or greater.
• If the shipper valued a shipment at less than $100, insurance would be free. If the shipper declared a value of $100 up to $499, insurance charges would cost an extra $0.50 per $100 valuation. Insurance could be secured, even for values of $5,000 or more, obviously at a higher cost.
• Shippers would have a choice of five different transit times, the highest priced being for next-day delivery by 7:00 a.m. Other next-day delivery times, at slightly lower rates, would be by 10:00 a.m. or by 2:00 p.m. Additional rate options would be second day delivery (either before noon or after noon) or three- to five-day delivery (either before noon or after noon).

As you can see, shippers would have a considerable number of pricing options to choose from depending on specific needs and how much more the shipper is willing to pay for premium services. But again, cube-based is still in the early stages of development. It’s a work-in-progress and still has a way to go before even the first carrier finalizes its cube-based pricing system.

I want to close by thanking Hank Mullen, president and CEO of The Visibility Group, based in Alpharetta, Ga., for the information he has provided me for this month’s column. Hank has been a real pioneer in the development of the cube-based pricing concept. He can be reached by calling (678) 566-0849, or you can check out the Group’s website at www.thevisibilitygroup.com.